US oil spending could hit $165B on global conflicts, report says

HOUSTON — Oil and gas producers could boost their annual spending to $165 billion in the United States as conflicts in Iraq and elsewhere send crude prices higher, according to a report released by Barclays on Wednesday.

Exploration and production spending, the lifeblood of the oil field service industry, which employs thousands in Houston, is expected to jump 9.6 percent over last year, according to the London bank.

North American operators are putting more muscle behind oil production, and already have made slight adjustments to their outlook for this year’s oil prices, their benchmark for spending budgets.

But at $91 a barrel, their estimates still trail this year’s average U.S. benchmark crude prices by about $10 a barrel. West Texas Intermediate crude was $106.43 a barrel Thursday. It had risen past $100 a barrel in May.

“Given the conservative commodity price assumptions currently driving spending, we think North American E&Ps could be in position to outspend their budgets by the end of the year,” Barclays analysts wrote in the report of exploration and production companies.

Forty-two percent of U.S. exploration and production companies told Barclays they would increase their capital spending budgets if West Texas Intermediate crude prices kept hovering around $100 a barrel.

None of the companies Barclays surveyed said they would drop spending at current prices, “which we think provides strong evidence that actual E&P spend will outpace current expectations.”

The U.S. rig count climbed above 2,000 in mid-April, up from about 1,750 at the beginning of last year, Barclays reported, citing RigData and its own research.

In the Permian, the rig count currently stands 33 percent above its level at the same time last year as operators deploy more horizontal units equipped to tackle shale basins.

“Recent activity gains in the Permian have been massive,” but the play is “still in the early stages” of increased growth, as oil producers keep pursuing attractive returns “tied to the new horizontal wells coming online throughout the basin.”

20. Petroliam Nasional Berhad (Petronas) -- state oil company of Malaysia
2012 rank -- 20
[Photo: A worker unloads an empty Petronas gas cylinder at a shop in Ampang, in the suburbs of Kuala Lumpur on November 14, 2013.] less

20. Petroliam Nasional Berhad (Petronas) -- state oil company of Malaysia
2012 rank -- 20
[Photo: A worker unloads an empty Petronas gas cylinder at a shop in Ampang, in the suburbs of Kuala Lumpur on ... more

18. Abu Dhabi National Oil Company (ADNOC) -- national oil company of the United Arab Emirates
2012 rank -- 18
[Photo: With an oil tanker in background, fishermen cross the sea waters off Fujairah, United Arab Emirates in 2012.] less

18. Abu Dhabi National Oil Company (ADNOC) -- national oil company of the United Arab Emirates
2012 rank -- 18
[Photo: With an oil tanker in background, fishermen cross the sea waters off Fujairah, ... more

15. Lukoil -- international oil company based in Russia
2012 rank -- 16
[Photo: A Lukoil service station in 2012, in Princeton, N.J.]

15. Lukoil -- international oil company based in Russia
2012 rank -- 16
[Photo: A Lukoil service station in 2012, in Princeton, N.J.]

Photo: Mel Evans / Associated Press

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14. Sonatrach -- national oil company of Algeria
2012 rank -- 14
[Photo: A satellite image shows the Amenas Gas Field in Algeria, which is jointly operated by BP and Norway's Statoil and Algeria's Sonatrach.] less

14. Sonatrach -- national oil company of Algeria
2012 rank -- 14
[Photo: A satellite image shows the Amenas Gas Field in Algeria, which is jointly operated by BP and Norway's Statoil and Algeria's ... more

Photo: DigitalGlobe / Associated Press

Image 8 of 21

13. Petróleo Brasileiro S.A. (Petrobras) -- semi-public oil company of Brazil
2012 rank -- 15
[Photo: Then-Brazil President Luiz Inacio Lula da Silva (center) waves a national flag next to his wife Marisa Leticia, while posing for a picture with workers of the Brasil-Fels shipyard who built the Petrobras oil platform P-51 in 2008.] less

11. Petróleos Mexicanos (Pemex) -- national oil company of Mexico
2012 rank -- 11
[Photo: An oil worker holds the hook of a crane at the Centenario deep-water drilling platform off the coast of Veracruz, Mexico in 2013.] less

11. Petróleos Mexicanos (Pemex) -- national oil company of Mexico
2012 rank -- 11
[Photo: An oil worker holds the hook of a crane at the Centenario deep-water drilling platform off the coast of ... more

Photo: Dario Lopez-Mills / Associated Press

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10. Total -- international oil company based in France
2012 rank -- 8

10. Total -- international oil company based in France
2012 rank -- 8

Photo: Jacques Brinon / Associated Press

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9. Chevron -- international oil company based in the United States
2012 rank -- 8
[Photo: A couple watches tug boats transport the Chevron Corp. Jack St. Malo semi-submersible drilling and production platform to the Gulf of Mexico.] less

9. Chevron -- international oil company based in the United States
2012 rank -- 8
[Photo: A couple watches tug boats transport the Chevron Corp. Jack St. Malo semi-submersible drilling and production ... more

Photo: Eddie Seal / Bloomberg

Image 13 of 21

8. Gazprom -- partially state-owned oil company in Russia
2012 rank -- 10
[Photo: The logo of Russia's state-controlled gas giant Gazprom is displayed in front of the building of Russia's government in Moscow.] less

8. Gazprom -- partially state-owned oil company in Russia
2012 rank -- 10
[Photo: The logo of Russia's state-controlled gas giant Gazprom is displayed in front of the building of Russia's government in ... more

Photo: ALEXANDER NEMENOV / AFP/Getty Images

Image 14 of 21

7. Royal Dutch Shell -- international oil company based in the Netherlands
2012 rank -- 7
[Photo: Peter Voser, chief executive of Royal Dutch Shell speaks during a press conference in London in May 2013.]

7. Royal Dutch Shell -- international oil company based in the Netherlands
2012 rank -- 7
[Photo: Peter Voser, chief executive of Royal Dutch Shell speaks during a press conference in London in May 2013.]

Photo: BEN STANSALL / AFP/Getty Images

Image 15 of 21

6. BP, international oil company based in the United Kingdom
2012 rank -- 6
[Photo: Bob Dudley, group chief executive at BP, speaks at IHS CERAWeek 2013 conference in Houston.]

6. BP, international oil company based in the United Kingdom
2012 rank -- 6
[Photo: Bob Dudley, group chief executive at BP, speaks at IHS CERAWeek 2013 conference in Houston.]

Photo: Johnny Hanson / Houston Chronicle

Image 16 of 21

5. Petróleos de Venezuela, S.A. (PDVSA) -- national oil company of Venezuela
[Photo: A worker is seen busy at the nitrogen plant of the refinery at Puerto la Cruz, 200 km from Caracas in 2008.]

5. Petróleos de Venezuela, S.A. (PDVSA) -- national oil company of Venezuela
[Photo: A worker is seen busy at the nitrogen plant of the refinery at Puerto la Cruz, 200 km from Caracas in 2008.]

Photo: HO / AFP/Getty Images

Image 17 of 21

4. China National Petroleum Corporation (CNPC) -- national oil company of China
[Photo: A car is parked in front of a billboard of CNPC at the Olympic Green in Beijing, China.]

4. China National Petroleum Corporation (CNPC) -- national oil company of China
[Photo: A car is parked in front of a billboard of CNPC at the Olympic Green in Beijing, China.]

Photo: China Photos / Getty Images

Image 18 of 21

3. Exxon Mobil -- international oil company based in the United States
2012 rank -- 3
[Photo: Gas prices are displayed at an Exxon station in Pittsburgh.]

3. Exxon Mobil -- international oil company based in the United States
2012 rank -- 3
[Photo: Gas prices are displayed at an Exxon station in Pittsburgh.]

Photo: Gene J. Puskar / Associated Press

Image 19 of 21

2. National Iranian Oil Company (NIOC) -- national oil company of Iran
2012 rank -- 2
[Photo: Iranian oil technician Majid Afshari makes his way to the oil separator facilities in Iran's Azadegan oil field southwest of Tehran, Iran.] less

2. National Iranian Oil Company (NIOC) -- national oil company of Iran
2012 rank -- 2
[Photo: Iranian oil technician Majid Afshari makes his way to the oil separator facilities in Iran's Azadegan oil ... more

Photo: Vahid Salemi / Associated Press

Image 20 of 21

1. Saudi Aramco -- national oil company of Saudi Arabia
2012 rank -- 1
[Photo: Employees of the Saudi Aramco oil company prepare for the first day of the Arab Oil and Gas exhibition in Dubai, United Arab Emirates in 2007. ] less

1. Saudi Aramco -- national oil company of Saudi Arabia
2012 rank -- 1
[Photo: Employees of the Saudi Aramco oil company prepare for the first day of the Arab Oil and Gas exhibition in Dubai, United Arab ... more